State Entrepreneurism

84 Pages Posted: 2 Jul 2009 Last revised: 8 Jul 2010

Date Written: 2009


The subprime crisis of 2008 resulted in an unprecedented investment in private enterprise by the U.S. government. Although the U.S. bailout was based on Keynesian interventionism, the subsequent actions of the Obama administration in rescuing the American automobile industry suggest a shift in economic policy from a liberal market economy to a coordinated market economy. Is there a role for government as a market participant while still preserving the American institution of entrepreneurism? This paper analyses that question by drawing upon recent socio-economic literature on the typologies of capitalism and institutional change. Interestingly, two other events lay the groundwork for institutional change. First, some sovereign wealth funds that invest for the purpose of wealth creation provide a model for government involvement according to the rule of the game of a liberal market economy. When the state behaves as a prudent investor, it avoids the moral hazards created by repeated bailouts yet also adds liquidity by creating markets through the principles of contrarian investment. Second, such investment - if properly managed - could help fund the welfare state as a Pareto improvement. The crisis facing social welfare programs may drive institutional change in U.S. perceptions on the advisability of government involvement as an investor. This paper attempts to elicit a theory of state entrepreneurism that reconciles Keynesian interventionism with the neoclassical economic principles that provide for private incentive and entrepreneurial innovation.

Portions of this unpublished paper were substantially rewritten and revised into a new draft titled, "The Government Shareholder: Regulating Public Ownership of Private Enterprise," which can be downloaded at

Keywords: state entrepreneurship, state entrepreneurialism, state entrepreneurism, subprime financial crisis, varieties of capitalism, Social Security reform, sovereign wealth funds, comparative political economics, New Institutionalism, institutional change, government investments, government bailouts

JEL Classification: A12, A14, E00, E60, H50, H55, H60, I30, L10, K22, K23

Suggested Citation

Templin, Benjamin A., State Entrepreneurism (2009). Thomas Jefferson School of Law Research Paper No. 1428108, Available at SSRN:

Benjamin A. Templin (Contact Author)

Thomas Jefferson School of Law ( email )

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619-961-4317 (Phone)

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